Value at Risk (VaR)
A loss threshold that a day's return should exceed only with a stated small probability.
A 95% one-day VaR of −2% says: on 95 days out of 100, the day's loss was smaller than 2%. It says nothing about how bad the other five days were — that is Conditional VaR.
Formula
VaR 95% = the 5th percentile of daily returns
How to read it
More negative means a heavier left tail.
How to use it
A plain-language loss threshold for an ordinary bad day.
Limitations
Says nothing about how bad the worst days beyond it are — read CVaR for that — and historical VaR assumes the past's bad days are representative.
In Kereon
Portfolio. Historical: the 5th (or 1st) percentile of the daily returns of today's weights over their price history, one-day horizon. The dollar figure is that percentage × total value.
Investing · price record. Hist VaR uses the symbol's own daily returns; Parametric assumes a normal distribution; Cornish-Fisher adjusts that for skew and kurtosis.
Also called: value at risk, var, hist var, var in dollars, 95% one-day var, monthly var, parametric, cornish-fisher, 1-in-20 day (var 95), 1-in-100 day (var 99).